Sicco Naets, 39, is a manager in Ottawa. He says he’s further ahead in his job than his parents were at his age. ‘But my standard of living is a lot lower than theirs was.’ (DAVE CHAN FOR THE GLOBE AND MAIL)

Sicco Naets, 39, is a manager in Ottawa. He says he’s further ahead in his job than his parents were at his age. ‘But my standard of living is a lot lower than theirs was.’(DAVE CHAN FOR THE GLOBE AND MAIL)

What growing income inequality is costing Canada’s future generations
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Every generation expects to achieve more than the one that came before it and for many years, those expectations came true. But a disquieting trend has emerged over the past two decades, as the gap between the richest Canadians and the rest has grown, faster here than in all but one other OECD country, the United States.
The Globe and Mail

Wealth Paradox

Wealth Paradox

For now, Canada sits comfortably in the middle of the curve among developed countries. It’s more equal and traditionally more upwardly mobile than those at the extremes of the scale, including the United States, but it trails countries such as Denmark, Norway and Sweden.

And yet a disquieting trend has taken root as Canada emerges from a decade transformed by powerful forces – some beyond our borders, others closer to home. Globalization, a digital revolution and public austerity programs are reshaping the economy. Good paying factory jobs continue to vanish, and middle-class incomes are getting squeezed. Many of the great equalizers – pensions, public health care and education – are threatened by the fiscal challenges facing governments at all levels.

That leaves a greater share of income, wealth and power in the hands of contemporary Jay Gatsbys.

The challenge for the country is to preserve for future generations all the good things that helped previous generations – especially the massive Baby Boom cohort – thrive and get ahead, argues University of Ottawa economist Miles Corak, one of Canada’s leading experts on poverty and mobility.

“We have a sense of being relatively successful in terms of mobility, but it reflects an era that was more equal,” he points out.

Today’s twenty and thirtysomethings are likely to find it much harder to get ahead than their parents did, he warns. For them, even a middle-class life is increasingly elusive.

Sicco Naets, a 39-year-old manager at an Ottawa high-tech start-up, is emblematic of many post-Baby Boomers, who worry the Canadian dream is passing them by. He and his wife earn “well above” the national average. They have two children, one car, little debt and a modest suburban town home.

And yet Mr. Naets is frustrated and angry that his generation seems to be slipping further behind. He dreams of a larger house for his growing family, but he’s fearful moving up will leave him too much debt, too little savings for retirement, or both.

“Compared to my parents, I’m way further ahead from a job point of view, I’m better educated and I’m probably in a higher income bracket. But my standard of living is a lot lower than theirs was,” he says.

Stuck in a slow-growth economy after a decade of stagnating incomes for the middle class, experts say Canada is at a crossroads. It can look to countries that have found creative ways to nurture greater equality and mobility, without sacrificing economic growth. Or it can follow the U.S., Britain and other countries down the path of increasingly isolated social extremes.

While inequality is significantly less pronounced than in the U.S., Canada is trending in the same direction as its neighbour on several key metrics, including ebbing mobility, a rising share of income in the hands of the top 1 per cent and a swelling gap between what CEOs and workers make.

The country’s business elite – the chief executives of the top 100 companies – took home 122 times what the average worker did in 2012, up from a ratio 84-to-one a decade earlier, according to research commissioned by The Globe and Mail.

The reality is that perfect equality is both unattainable and undesirable. Nowhere are wealth and income distributed completely evenly across a population. Countries are all unequal, and that’s generally a good thing. Inequality creates a powerful incentive to work, to invest and to get ahead. More income is the reward for success, which is spread to others when those at the top invest, start new businesses and hire more workers.

But it’s all a question of degree. You can have too much of a good thing.

Former prime minister Paul Martin, 75, figures he’s part of the most fortunate generation in Canadian history. He entered the work force in the booming 1960s, at the vanguard of an age group that would only know rising incomes and boundless opportunity.